As Agencies Explore Performance, They’ll Look to Avoid Repeating History

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Amit Joshi is the Director of Product and Data Science at Forensiq by Impact - directing product strategy, identifying emerging fraud patterns and architecting new techniques for preventing them. He is also responsible for cultivating partnerships and leading the charge for data science-driven algorithm design.

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Agencies are adopting performance marketing to remain relevant in an evolving advertising landscape. However, in a space ripe with opportunities for fraud, Amit Joshi, Director of Product & Data Science at Forensiq by Impact, discusses how agencies can avoid pitfalls and ensure long-term success.

Trust between advertisers and agencies is hitting a low point, according to recent studies, with advertisers looking to control costs and put an end to rebates. An ANA study late last year found that 35% of brands are moving at least part of their programmatic work in-house, further eroding agency margins. As a result, digital media agencies are exploring performance marketing as a way to broaden their services offerings.

Performance marketing is hardly a new discipline, but it is to many agencies that have built their business around a CPM model. The space is ripe with opportunities for gaming the system, which may deter many agencies, out of fear that they’ll fall prey to fraudsters. Still, even without deep experience in monitoring performance efforts, agencies can succeed -- and even thrive -- in the space, provided they take an honest approach and are mindful of potential trouble areas.

Understanding fraud

Fraud came to the forefront of the performance space in the late 2000s, thanks to large payouts for high-value actions. This eroded trust and left many disillusioned with the channel as a whole. The heart of the issue was media partners gaming attribution models to take advantage of the last click, the original performance marketing metric that is still prevalent in most pay-for-performance campaigns.

If a consumer arrives on a website to make a purchase, the partner that draws the final click from the consumer is awarded all of the credit. When only attributing the final click, it’s easy to introduce fraud in the form of cookie stuffing and toolbars that generate clicks without a user’s intent. Several media partners figured out that they could find customers very late in the purchase funnel, force the final click and take both the credit and financial reward while delivering no value in what’s called "demand interception."

While fraudsters are focused on last-click, due to its prevalence, that doesn’t mean more complex attribution models are fraud free. As long as dishonest parties understand the attribution model being used, then they can game the system. While algorithmic and machine-learning-based attribution are harder to manipulate, they are practically non-existent in the performance world.

The incentive for neglect

No matter how it’s done, gaming the system hurts the brands the most, because their budget rewards partners who drive very little revenue and fails to compensate those who actually move consumers down the funnel. Still, sometimes there is no immediate monetary impact from attribution fraud. Rather than stealing money, the bad actors game advertiser KPIs to try to look like high-value media partners or traffic sources, leading the advertiser to increase spend.

Traditional digital media agencies are accustomed to working with large publishers, but the performance space introduces a mix of long-tail publishers and networks alongside those big media partners. Agencies, lacking familiarity with these partners, will face a learning curve.

There are situations where the agency itself may be a victim of fraud and not realize it. When bad actors game the system in a way that makes them seem like valuable partners, there is little incentive for anyone along the chain to identify fraud, especially if it looks good in the reporting. If a partner drives an additional $100,000 in sales and helps an agency rep earn a bonus, is that rep going to report the issue when they discover the partner has been taking credit for direct sales?

This is one of many nuances within the performance discipline that require extensive knowledge. A failure to manage a partner portfolio will unintentionally create opportunities for fraud, so both agencies and their brand clients need to be aware of these issues.

Moving beyond KPIs

Agencies looking to master the performance space and build long-term trust with their clients must maximize their knowledge of both the latest attribution models and the techniques used to game those models. Advertisers and agencies alike need to understand which KPIs can be gamed and how, but they also need to know that simply aligning on KPIs isn't enough.

In CPM-based advertising, where fraudsters steal advertisers’ budgets, aligning on a financial KPI (such as revenue driven by conversions) helps brand and agency teams drive down fraud to increase revenue or improve ROI or ROAS.

In the performance world, the fraudster steals the media partner's revenue. If revenue was the KPI for both advertiser and agency, it can continue to grow in the short term, even with active fraud. Basic KPI alignment also means that media partners driving real revenue are never recognized because conversion credit is stolen from them. This may convince agencies and performance marketers to mistakenly drive the high-value partners out of the program, simply because it appeared they didn’t hit a KPI. And even if it doesn’t, in the long term, the media partner may realize that they aren’t getting enough payouts from the advertiser, they will shift their attention to other, more lucrative programs with other advertisers, eventually hurting the original advertiser’s program.

At the opposite end of the spectrum, the fraudster may also be stealing advertiser budgets, by falsely claiming credit for performance revenue that would have otherwise been completely organic.

Meanwhile, advertisers need to be aware that performance is another area where fraud may occur. There are many trustworthy agencies out there, but brands need to make sure that they are getting maximum value. Brands and agencies both will need to analyze affiliate program data to figure out how much value their partners really provide.

Fortunately for agencies, many potential clients are still coping with bad actors committing fraud by gaming attribution models, which creates an opportunity to help performance marketers determine when clicks are misattributed and how to minimize payouts to potentially malicious media partners.

As agencies adapt to the changing advertising landscape, performance marketing provides a viable new source of revenue and field of expertise. Agencies that enter performance armed with the right attribution fraud cookie stuffing detection technology, a clear-eyed understanding of the potential pitfalls and a desire to create value for their clients will find themselves set up for long-term success.